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The Autorité des Marchés Financiers (AMF- French Prudential Supervision Authority) set up a Scientific Advisory Board under the supervision of its president Gérard Rameix, who is also president of the AMF.

The Scientific Advisory Board chose ‘Financial education in the digital era’ as the theme of its annual conference, which was held on 20 June 2016 in partnership with Paris School of Economics.

The conference was opened by François Villeroy de Galhau, Governor of the Banque de France (France’s central bank). He stated that financial literacy “shall help everyone make informed decisions”. In this regard, financial literacy is a “factor for economic efficiency and social fairness”, which justifies involvement from public authorities- including, namely, the Banque de France. In partnership with both the Autorité de Contrôle Prudentiel et de Résolution (ACPR- French Prudential Supervision Authority) and the AMF, the Banque de France ought to be a “caring educator, but an attentive regulator”, as it is “imperative that financial literacy and Regulation should be taken forward jointly, as to allow for new technologies to develop, which would be understood by all and for the benefit of all”.

Three roundtables followed. The first roundtable aimed at assessing financial literacy trends and their impact on the financial behaviour of consumers and investors in Europe. The second session focused on the opportunities opened up by new technologies (upon which Fintechs, e.g., crowdfunding platforms, data aggregators and automated financial advice services are thriving) as regards financial behaviours. Lastly, the third panel discussion, which involved several French (AMF, Institut National de la Consommation- INC, French National Institute for Consumer Affairs) and European (European Commission) Regulators, draw conclusions from the first two roundtables and discussed on the issues that an increasingly digitalised financial education raises for Regulatory authorities.

Since this conference raises many crucial questions for Regulation, it is important to recall what has been said in the panel discussion on the role of Regulator with regards to financial education (I.) before sharing some thoughts on this matter of particular interest (II.).

I. The third roundtable: Financial education in the digital era: what challenges for Regulators?

The third roundtable was moderated by Bertrand de Juvigny, AMF’s General Secretary. He recalled that if financial education was a topic that has been of “serious concern to the AMF” for several years, the underlying Regulatory strategy now requires to be “revisited in a new context in which digital takes up stage and seizes power”.

It appears that two main lines of thought came out from the discussions: the speakers first reported how consumers and companies in the Fintech industry have been expressing new needs for Regulation lately (A.); then, they wondered whether Regulators themselves could undertake the investors’ financial education (B.).

A. New needs for Regulation stemming from an increasingly digitalised financial education

According to Agnès-Christine Tomas-Lacoste, Executive Director of the INC, the fact that consumers have to use new, digital financial services brings about renewed worries about cybersecurity: to her, there is a “genuine expectation among consumers on an increased regulatory protection from the Regulator”.

Philippe Pelle, deputy head of unit at the European Commission, presented the results of the European Commission Green Paper on retail financial services in Europe, which concludes on the feedback from the public hearing of stakeholders (i.e., financial companies of the financial services sector) the EC led on December 2015. Fintech companies indicated they expected the Regulator to “ease digital information” as to “simplify it and make it more efficient”. They also want the Regulator to “show some understanding” on the regulation they are subject to, which should be adapted to the new specificities of the sector.

Franck Guiader recalled the efforts made by the AMF to set an adapted regulation to crowdfunding companies, to the extent that the sector now benefits from “complete legal certainty”.

B. The possibility for the Regulator to undertake the consumers’ financial education

According to Franck Guiader, a “Regulatory to Business to Customer” approach should be fostered. In this view, financial education shall not be directly financed by the Regulator; nonetheless, the Regulator should educate the players, which will educate consumers in return.

The Regulator shall then educate the players, inter alia, by providing them with clear information on the regulations they might be subject to. In return, the Regulator shall also make sure that the players’ contribution to the financial education of the consumers is “transparent, objective and in the interest of the consumer” (Philippe Pelle). This view is shared by Agnès-Christine Tomas-Lacoste, who considers that the primary role of the Regulator is to “ensure genuine trust, repeat, reiterate, provide with clear information” to support the development of Fintech as regards financial services.

During his concluding speech, President of the AMF Gérard Rameix underlined the AMF’s strong will to educate, as he stated that “these new technologies — as they allow financial institutions to know better their customers, as they ease comparison between products and as they optimize diversification — will somehow compensate the lack in financial education of the public”.

II. The opportunity to link Regulation and Education

Though financial education (often referred to as financial literacy in research papers) is not a recent concept, public authorities pay a greater attention to it since the financial crisis. Since 2010 indeed, various studies have shown that people usually did not have basic financial knowledge, and that this was likely to contribute to the fragility of the financial system.

The OECD defines financial literacy as “a capacity building process by which individuals, through information, instruction and/or objective advice, i. improve their understanding of financial products and concepts—, ii. develop the skills and confidence—, iii. make informed choices, to know where to go for help, and take other effective actions—, iv. become more aware of financial risks and opportunities —to improve financial wellbeing”. Financial literacy became in 2012 a G20 priority; it is now part of several specific provisions in EU directives. In 2015, it even became a national strategy, which, as Governor François Villeroy de Galhau, is operated by the Banque de France “in close coordination with the AMF”.

It seems that Regulation, as regards financial education, has a dual role: though the primary function of the financial Regulator is to protect an increasingly autonomous consumer (A.), he is now called on to adopt a more proactive approach towards performing savings that would meet political objectives (B.).

A. The Regulator, guaranteeing consumers’ protection by educating them

On the one hand, financial education’s object and effect is to increase the consumer’s autonomy. Financial Regulation takes part in those efforts to become self-reliant as it ensures that the consumer is provided with a transparent and high-quality information (on financial products they are offered, or on the possible use that digital financial services could make of their personal data). The action of the Regulator, as it neutralizes potential conflicts of interest that could arise, is a vector of trust for the consumer towards financial services, even if they are dematerialised. The AMF’s 2013-2016 Strategic Plan, which aimed at “restoring the trust of savers”, is fully in line with this.

Incidentally, the Regulator’s vigilance as regards financial education also protects the market from the inherent risks arising from an increasing autonomy of the consumer. It appears indeed that such an autonomy is sometimes all the more exhilarated by ‘disruptive’ digital companies that place it at the heart of their strategy: this is especially true for the so-called ‘social finance’, which operates on virtual platforms and gives rise to the formation of virtual communities that are likely to influence individuals in their financial decision-making processes.

B. The Regulator, promoting the savers’ “effectiveness” by educating them

On the other hand, however, the fact that France now has a distinctive “national strategy” shows that the necessity to improve financial education exceeds the sole objective to protect consumers or savers.

In his introductive speech to the conference, the Governor of the Banque de France first introduced financial education as a “factor of efficiency for the financing of the economy”. This view takes us further away from the definition brought by the OECD, according to which the ultimate end to financial education is the individual wellbeing of each decision-making individual. Public authorities thus seem to consider that we should lean towards a “better” financial education of the savers, that should be designed and implemented by public authorities themselves, in partnership with independent regulatory agencies (such as the AMF or the ACPR), both for the benefit of the State itself (since a wider-spread preference among individuals for long-term savings may help implementing pension reforms) and for the real economy’s (since the diversification of the savers’ investment portfolio towards more equity shareholding may improve companies’ financing capacity). The individual wellbeing of the consumer is only considered as subsidiary.

Here is thus another salient example that Regulation law is teleological by nature; it is underpinned by political principles, and its primary feature is that it is designed to remind the market which objective it should aim to. In this view, the Regulator must draw on all available means: education is one of them.